A View From Park Lane

Welcome to A View From Park Lane, our weekly take on the news for the week ending 26th February 2012

The big news this week is the relatively low level of home ownership highlighted by the English Housing Survey, just released by the Department of Communities and Local Government. According to this report, the proportion of owner-occupiers in the housing market in the UK has fallen to 66%, the lowest level since 1988.

The Daily Mail recalls the peak period of home ownership during the 1980’s, where Mrs Thatcher’s government made it a cornerstone of its ambitions and millions of working-class people began dreaming of owning their own homes. Tenants were give the right to buy their council homes often at below the market value, contributing to a sharp rise in home ownership, although the record low of owner-occupiers was actually recorded in 1988 (65.7%). The number of owner-occupiers has been in decline since 2003 when it peaked at 70.9%.

Meanwhile, the percentage of people renting from private landlords has increased to 16.5%, a 50% increase since 2000. There has also been an increase in people living in council or housing association homes, now standing at 17.5%. As The Daily Mail confirms, this equates overall to one in three of the population now renting homes from a private landlord, a council, or a housing association.

Yahoo UK & Ireland Finance suggests the mortgage market has had an impact on these figures, with readily available buy-to-let mortgages and a decrease in lending to first time buyers since the credit crunch. The government survey reveals that only 10% of homeowners are under 35, highlighting the difficulties faced by these first time buyers. The Independent confirms that the average age of a first time buyer, which fell to about 25 in the 1980’s, is now up to 37 – and the National Housing Federation has warned that it could soon reach 43.

The Daily Mail suggests that the economic downturn has left many younger people struggling to buy, as it has impacted negatively on incomes, the availability of cheap mortgages and also the number of new homes being built. Many lenders now insist on at least a 20% deposit, which can prove a difficult hurdle for many first time buyers.

The Telegraph confirms that the barriers for the first time buyer are likely to worsen with the end of the stamp duty holiday on properties under £250,000 from March 26th. The Independent suggests this has triggered a minor flurry in sales which may explain the increase in first time buyer mortgages in December.

A continually increasing population has meant competition for housing has remained strong, so prices (and also rents) have stayed relatively high as The Telegraph confirms. Sellers have increased their asking prices by the highest monthly jump for a decade.

The Independent also notes that the pressures in the market are provoking the Government into producing a housing strategy. The NewBuy Guarantee scheme will underwrite 95% mortgages on properties up to £500,000, a move hoping to assist potential buyers struggling to get on the housing ladder. There is also a push to address the issues surrounding stalled housing projects in a bid to support housing growth.

The Independent further suggests that three-quarters of all non-homeowners still aspire to owning their own property - despite the Halifax commissioned study by the National Centre for Social Research which found that two-thirds of non-homeowners believed they had few prospects for buying a home.

The view from Park Lane is that while the economic downturn has led to slightly lower ownership rates, in many areas of the UK, house prices have broadly stabilised over the last 12 months and it is now significantly cheaper to buy than to rent. (Halifax study: January). Therefore given the highly attractive mortgage deals available (e.g. Chelsea BS 3.19% 5 year fixed deal for up to 75% LTV) and the large volumes of property currently for sale, it is a positive market for buyers. We also see continued upturn / activity in the buy to let market, with yields of between 6 %and 9% outpacing most other traditional investment vehicles.

 “A View From Park Lane” is provided by Richard Combellack- Head of Marketing at Fine & Country.

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